More and more drivers want cars under $50,000. How to find a cheap new vehicle
Across the U.S., used car sales are booming, with companies like Autonation, CarMax, Carvana and Buffalo, New York-based used car startup ACV Auctions profiting.
Patrick T Fallon | Bloomberg | Getty Images
During the pandemic, buyers splurged on higher-priced new cars. Given the current high car costs and interest rates, drivers are now shifting their focus to cheaper models. However, it might not be easy to find one.
More buyers are choosing vehicles in the $45,000 to $50,000 price range, the price level of mid- to high-trim three-row SUVs, said Joseph Yoon, consumer insights analyst at Edmunds.
This shift is reflected in so-called “days to turn” numbers, which measure how long cars remain in dealers’ inventory before they are sold. According to Edmunds, vehicles selling for less than $50,000 currently stay on the lot an average of just 26 days, compared to 40 days for vehicles with a higher sticker price.
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“We’re seeing the overall effect of the economy here,” Yoon said.
“People are no longer choosing high-end cars, but rather mid-range cars,” he added. “This is where we start to see the change.”
Still, the average transaction price for a new car was $47,941 in August, up 0.8% from July and up 1.6% from a year ago, Edmunds found. Interest rates on new car financing also rose by 7.4% in August, marking the highest level since 2008.
As a result, the average monthly payment for new vehicles reached a record $738.
Models that average under $20,000 are rare
Drivers looking for a new car will likely quickly realize that it’s harder to find cheap new cars these days.
The barometer of $20,000 or less is a sort of unofficial price threshold for an affordable new car, said Brian Moody, editor-in-chief of Kelley Blue Book.
“There aren’t as many cheap new cars as there used to be,” Moody said.
In fact, according to Kelley Blue Book, the average new car transaction price in July was only under $20,000 for one car model Data: the Mitsubishi Mirage.
Consumers looking for a car that can sell between $20,000 and $50,000 will likely find more options. Of 35 brands, 14 – Buick, Chevrolet, Chrysler, Fiat, Honda, Hyundai, Kia, Mazda, Mini, Mitsubishi, Nissan, Subaru, Toyota and Volkswagen – had average transaction prices below $50,000 in July. after to Kelley Blue Book.
Of course, the transaction price doesn’t tell the whole story, experts said. This price represents what the average buyer pays – a variable that depends on factors such as car dealer markups and promotions, as well as any add-ons selected by the buyer at the time of purchase.
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Just a few years ago, consumers could find entry-level vehicles with a starting price of $15,000, said Paul Waatti, industry analyst at market research firm AutoPacific.
Today’s lack of cheaper options is due to a variety of factors, experts said.
This includes consumer preferences – people tend to want models with more features, said Waatti.
“For cultural reasons, Americans don’t like it when their car doesn’t have features” such as automatic climate control, an auto-play screen and parking sensors, Yoon said.
Automakers know this to be true and are using it to their advantage in marketing, Waatti said.
“Automakers obviously want to be able to recognize that they are offering an affordable vehicle, and they can do that through messaging,” he added. “But at the end of the day, they don’t build many of these lower-priced models.”
Instead, automakers will produce more high-end models with features that consumers want, Yoon added.
In fact, car sales in the luxury market segment are up, Moody said. They now account for about 20% of total new car sales, up from about 10% to 13% before the Covid-19 pandemic, he said.
At the end of the day, they don’t build many of these lower priced models.
Paul Waatti
Industry Analyst at AutoPacific
Five years ago, 12 vehicles were sold at an average price of more than $100,000. According to the Kelley Blue Book, there are 32 vehicles today. Both figures do not include “super exotics” from companies such as Ferrari, Lamborghini and Rolls-Royce.
Inflation for new and used cars also rose sharply during the pandemic, leading to higher vehicle prices. Materials and supplies have become more expensive, driving up production costs for automakers, Waatti said, and those higher costs are being passed on, at least in part, to buyers.
Higher interest rates could also keep potential buyers away from the car market at the moment, experts say.
Since buyers, who generally look for the cheapest cars, tend to be on a budget, their absence from the market could drive up average purchase prices, they said.
According to Kelley Blue Book, the average purchase price for a new vehicle today is about $48,000, up from about $30,000 in 2012.
4 tips to find cars at a good price
Here are some general tips for consumers to find a budget-friendly car, courtesy of Tom McParland, owner of Automatch Consulting, a consumer car buying service:
1. Know your budget – really
Most car buyers use monthly payments to imagine how expensive a car is.
However, consumers should know their total budget before purchasing by using an online car loan calculator, McParland said. Otherwise, it’s hard to know whether you’re getting a good deal, he added.
Definitely Car Loan Calculator Let consumers work backwards by entering a monthly payment that fits their budget, along with other estimated information like the loan term and interest rate. The result: the total price of the vehicle that a buyer can afford.
“This is probably the best step a customer can take,” McParland said.
2. Look outside your local market
Casting a wide net when searching for a car gives you more potential inventory and leverage over dealers, McParland said. Some markets are “better than others” and if you look even an hour or two away, you’re “very likely to get a more competitive deal,” he added.
3. Obtain prices in writing beforehand
Get written confirmation of car prices from a dealer before stepping in the door, McParland said. A refusal to do so is a red flag, he said.
“That’s the code for ‘We’re going to try and rip you off,'” he said.
4. Purchase your financing
Do not rely on a dealer’s offer of financing.
Merchants can benefit from consumers by offering a higher interest rate than necessary, experts say. That’s why it’s a good idea to get pre-approved for a car loan — perhaps from a local bank, credit union or online lender — before walking into the dealership, they said.
These offers can provide leverage for a better rate at the dealer and are particularly useful for buyers with credit scores below 700, who are unlikely to qualify for the best rates available, McParland said.
https://www.cnbc.com/2023/09/11/more-drivers-want-cars-under-50000-how-to-find-a-cheap-new-vehicle.html More and more drivers want cars under $50,000. How to find a cheap new vehicle
